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A "Vertical" Analysis of Crises and Intervention : Fear of Floating and Ex-Ante Problems

Caballero, Ricardo J.; Krishnamurthy, Arvind - 2021

Emerging economies are prone to crises triggered by external shocks. During these crises, should the central bank stabilize the currency or domestic interest rates? If the choice is outside the central bank's control, as in a currency board, are there good policy substitutes? We argue that these...

Persistent link: https://www.econbiz.de/10013219686

Inflation Targeting and Sudden Stops

Caballero, Ricardo J.; Krishnamurthy, Arvind - 2021

Emerging economies experience sudden stops in capital inflows. As we have argued in Caballero and Krishnamurthy (2002), having access to monetary policy during these sudden stops is useful, but mostly for insurance' rather than for aggregate demand reasons. In this environment, a central bank...

Persistent link: https://www.econbiz.de/10013237236

Global Imbalances and Financial Fragility

Caballero, Ricardo J. - 2010

behind this crisis is the large demand for riskless assets from the rest of the world. In this paper we present a model to …

Persistent link: https://www.econbiz.de/10012757927

On the Global Impact of Risk-Off Shocks and Policy-Put Frameworks

Caballero, Ricardo J. - 2019

Global risk-off shocks can be highly destabilizing for financial markets and, absent an adequate policy response, may trigger severe recessions. Policy responses were more complex for developed economies with very low interest rates after the Global Financial Crisis (GFC). We document, however,...

Persistent link: https://www.econbiz.de/10012867100

Contingent Reserves Management : An Applied Framework

Caballero, Ricardo J.; Panageas, Stavros - 2021

One of the most serious problems that a central bank in an emerging market economy can face, is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In...

Persistent link: https://www.econbiz.de/10013222654

Financial Crash, Commodity Prices and Global Imbalances

Caballero, Ricardo J.; Farhi, Emmanuel; Gourinchas, … - 2021

In this paper we argue that the persistent global imbalances, the subprime crisis, and the volatile oil and asset prices that followed it, are tightly interconnected. They all stem from a global environment where sound and liquid financial assets are in scarce supply

Persistent link: https://www.econbiz.de/10013243462

The "Other" Imbalance and the Financial Crisis

Caballero, Ricardo J. - 2010

the U.S. would experience a sudden stop of capital flows, which would unavoidably drag the world economy into a deep … instead that the root imbalance was of a different kind: The entire world had an insatiable demand for safe debt instruments … of exposing the economy to a systemic panic. This structural problem can be alleviated if governments around the world …

Persistent link: https://www.econbiz.de/10013149302

Fire Sales in a Model of Complexity

Caballero, Ricardo J. - 2009

Financial assets provide return and liquidity services to their holders. However, during severe financial crises many asset prices plummet, destroying their liquidity provision function at the worst possible time. In this paper we present a model of fire sales and market breakdowns, and of the...

Persistent link: https://www.econbiz.de/10013155022

Bubbles and Capital Flow Volatility : Causes and Risk Management

Caballero, Ricardo J. - 2005

value in the developed world. Bubbles are beneficial because they provide domestic stores of value and thereby reduce …

Persistent link: https://www.econbiz.de/10012784276

Hedging Sudden Stops and Precautionary Contractions

Caballero, Ricardo J. - 2010

Even well managed emerging market economies are exposed to significant external risk, the bulk of which is financial. At a moment's notice, these economies may be required to reverse the capital inflows that have supported the preceding boom. While capital flows crises are sudden nonlinear...

Persistent link: https://www.econbiz.de/10012762811